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CCS: Lots of Hype, Very Little Traction

Copyright © 2021 Energy Intelligence Group

Twenty years ago, carbon capture and storage (CCS) was considered a key technology to decarbonize the global energy system. Coal-fired power plants in the US, China and elsewhere would progressively be retrofitted with CCS. This would trigger economies of scale and, helped by carbon pricing, rapidly make the technology economic and self-sustaining. That did not happen (NE Oct.29'20). While CCS did go from nonexistent to minuscule, the power sector embarked on renewable-based decarbonization. The economies of scale proved exceptionally successful, especially for solar photovoltaic (PV), which the International Energy Agency (IEA) recently dubbed the "new king of electricity" (NE Oct.15'20). European utilities now say they will not need CCS and have mostly stopped working on it; their US peers are hardly more enthusiastic; and even China looks set to rely on renewables and nuclear to achieve its new net-zero target to 2060 (NE Oct.1'20). Advocates of CCS now focus on hard to decarbonize industries such as cement, steelmaking and chemicals (NE Sep.17'20). But this may be another illusion. Without the power sector to decarbonize, the scale needed to deliver the necessary cost savings will remain insufficient. The IEA, in its 1.5°C-2°C scenario, sees CCS reaching 5 billion tons of carbon dioxide per year by 2050 and 10 billion tons by 2070. That's huge but it's equally questionable. For it to happen, 40% would come from power generation and 30% from the production of blue hydrogen from natural gas, an application that may never take off if green electrolytic hydrogen becomes competitive as quickly as many experts believe (NE Oct.22'20). Of the remaining 30% or so, half of the projected need for CCS is probably also avoidable if technologies such as steelmaking by hydrogen direct reduction are embraced. That would leave CCS with a 1 billion-2 billion ton/yr market by mid-century, or about 40 times today's 40 million tons. This would be enough to build a respectable industry -- but not a game changer with substantial climate impact. By comparison, global PV capacity expanded one-thousandfold to 600 gigawatts last year from just 600 megawatts in 2000, while its costs dropped by 90%. PV capacity could grow another tenfold and its costs fall by at least another 60% in the next two decades, according to the IEA. Does this mean oil companies should avoid investing in CCS? Probably not. One or two billion tons/yr of CO2 at, for example, $50 per ton -- whether this comes from selling emissions allowances or finding markets to use it -- could make it an attractive but relatively marginal $50 billion-$100 billion global business. It could certainly become a decent diversification opportunity for companies angling for a share of the pie (NE Oct.8'20). And it is what oil majors such as Eni and Total are targeting, according to their recent strategy presentations. They see CCS as a means to offset a significant chunk of their Scope 1 and 2 emissions, anything in the region of 10 million, 20 million or 40 million tons/yr by 2050. But it won't address their indirect Scope 3 emissions from the use of products sold, which for an oil company can typically amount to 10 times its direct emissions. The real opportunity for oil companies could be direct air capture (DAC), a technology similar to CCS but aimed at directly harvesting CO2 from the atmosphere. It gained visibility last year as Occidental Petroleum partnered with DAC start-up Carbon Engineering to develop a 1 million ton/yr project, which is expected to be commissioned in 2024. Oxy announced earlier this month it would seek net-zero Scope 3 emissions by 2050 and base that strategy on DAC (OD Nov.10'20). DAC is in theory more costly than CCS because CO2 is about 300 times more diluted in the air than in a power plant's flue gas. But it can be deployed anywhere, particularly near storage sites, which would avoid the complication of transporting captured CO2 while enabling oil companies to take full advantage of their geological expertise (NE Aug.27'20). Perhaps more importantly, it could prove to be a key fix in the likely event that the world overshoots its 1.5°C-2°C warming target and needs to achieve massive negative emissions to get back on track. The next couple of decades will reveal whether the promises of DAC prove to be any more realistic than those of CCS 20 years ago. Philippe Roos, Strasbourg

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